US cumene contract prices plummet, reach 11-year lows on dropping benzene

Author: Adam Burkin


HOUSTON (ICIS)--US April cumene contract prices plummet to their lowest levels in nearly 11 years on a drop in benzene contract prices and refinery-grade propylene (RGP) values, per ICIS analysis on Thursday.

April contract prices are assessed at 17-18 cents/lb ($375-397/tonne), a decline of 43% over the previous month. This marks the lowest range of contract prices since the 14-15 cents/lb ($309-331/tonne) range recorded in January 2009 as commodity prices were hit drastically during the Great Recession.

Cumene contract prices are formula based and tied to current-month costs for feedstocks benzene and RGP.

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Lower crude prices from the current coronavirus pandemic, OPEC and Russia price war and impending cap on global crude storage have contributed to lower prices in downstream markets. May WTI contract prices descended into negative territory on 20 April, the first ever for the benchmark, settling at -$37.63/bbl, but have since rebounded to just under $20/bbl.

April benzene contract prices plunged by 136 cents/gal ($409/tonne) to $1.21/gal, a drop of over 50% from the previous month, as crude values continue to push spot benzene prices lower. This drop was the furthest the market has seen since January 2009 when benzene contracts settled at $1.01/gal.

European benzene April contract price settled at €171/tonne, a decrease of €424/tonne from March, a 70% drop that also established a new low.

US refinery operating rates are likely to face downward pressure in the coming weeks as demand for transportation fuels has fallen sharply amid the coronavirus outbreak.

Refineries are the major source of US benzene and cumene production.

RGP values rose to around 16.5 cents/lb, up slightly from 15.5 cents/lb in the prior month. Spot prices have been mostly steady lately as shortened supply has overtaken limited demand. Refinery rates have recovered somewhat from their 18-year lows recently as producers have implemented rate cuts to combat a fall in global products demand.

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Cumene supply remains sufficient in the near term, despite sluggish derivative demand and weakened upstream markets which have halted cumene consumption.

Cumene is used to make phenol and acetone, which in turn can become resins, coatings, plastics or construction materials. It can also be used in gasoline blending.

Major US producers of cumene are CITGO, Flint Hills Resources, INEOS Phenol, Marathon and Shell.

Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

Focus article by Adam Burkin